Liffe unveils new alliance with Nasdaq

LIFFE, the London futures exchange, yesterday unveiled an alliance with Nasdaq to lure US and European investors to the market for single-stock futures.

Liffe launched the UK market in January, listing 25 stock futures. Yesterday it claimed the venture had been a success, with more than 200,000 contracts exchanged on 64m shares. The number of stock futures will rise to 40 in April and is likely to exceed 100 by the end of the year.

US investors have been prohibited from trading in stock futures under the Shad Johnson accord, which separates futures trading from equity trading. However, US regulators are to repeal the accord by December 21.

Single-stock futures are contracts to buy or sell shares in individual companies at an agreed price and date. They are cheaper to trade than shares and offer another way to hedge risk. The joint venture, which has yet to be named, will use Liffe's Connect trading platform. Neither the cost of the venture nor the distribution of profits was revealed.

The new entity will initially have a narrow focus, but both parties said there would be opportunities for other exchanges to get involved. Liffe chairman Brian Williamson also emphasised that Liffe's dialogue with the London Stock Exchange, as well as its own plans for flotation, would go on.

Mr Williamson, a former chairman of Nasdaq's international advisory board, also said he was still keen to see improvements in London's clearing and settlement systems: "Our objective is to be customer-driven and provide the market with a product that it wants and take things from there. It is a much more practical way to do things than to go into a smoke-filled room and force two exchanges together."

Yesterday's announcement comes a week after Liffe posted a return to the black after years of losses. John Hilley, chairman and chief executive of Nasdaq International said: "The world is moving rapidly toward electronic trading across a wide array of financial instruments. At the same time, geographic barriers are coming down. This partnership is an important step in both directions."

The Telegraph Investor

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